Target is seeing signs that its long-running turnaround effort is beginning to gain momentum, with the retailer reporting stronger second-quarter sales and raising its full-year outlook. The company also benefited significantly from tariff refunds, which provided a major boost to its bottom line.

For the fiscal second quarter, Target’s net sales increased 5.3% from a year earlier. Comparable sales, a closely watched measure that tracks sales at stores and digital channels open for at least a year, rose 3.8%. That was ahead of the 2.4% growth expected by Wall Street analysts.

The company said the improvement was broad-based, with stronger performance across its major business categories.

Tariff Refund Provides Major Earnings Boost

Target’s quarterly results received an unusually large boost from tariff refunds. The company reported a $752 million increase in net earnings, equivalent to $1.65 per share, from the refunds.

The repayment also contributed a $994 million pretax benefit to Target’s second-quarter gross margin and operating income.

As a result, Target reported net income of $1.88 billion, or $4.11 per share, for the three months ended August 1. That compares with net income of $935 million, or $2.05 per share, in the same period a year earlier.

Target reported quarterly revenue of $26.54 billion, above the $26.14 billion expected by analysts surveyed by LSEG.

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Retailer Lifts Its Full-Year Expectations

Target raised its full-year guidance as it benefits from both the tariff repayment and improving sales trends.

The company now expects full-year net sales growth of about 5%, an increase of one percentage point from its previous outlook.

Target expects full-year earnings per share, including the tariff refunds, to range between $9.90 and $10.90. Excluding the repayment, the company expects earnings per share of $8.25 to $9.25. That is higher than its previous range of $7.50 to $8.50.

The stronger outlook comes after Target delivered positive comparable sales growth for the second consecutive quarter, giving the retailer additional momentum as it works to rebuild its business.

Digital Sales and Same-Day Delivery Gain Ground

Target’s digital business also delivered strong growth during the quarter. Digital comparable sales increased 8.7%, while same-day delivery grew by more than 25%.

The company said all six of its major categories recorded growth, with food and beauty among the areas showing strength. However, apparel and home continued to trail the company’s stronger-performing segments.

Target has identified those categories as areas where further improvements are needed. The retailer said it changed 75% of its decorative accessories assortment in home and saw strong comparable sales following those changes.

The company has also reduced prices on more than 10,000 items, with additional price cuts planned. The strategy is aimed at making Target more attractive to customers and encouraging them to return to its stores.

Target opened 17 new stores during the second quarter as it continued to invest in its retail footprint.

Turnaround Gains Momentum, But Work Remains

The latest results are an important test of Target’s strategy under CEO Michael Fiddelke, who has emphasized the need for sustained improvement rather than short-term gains.

Target’s comparable sales increased 5.6% in the previous quarter, marking the company’s first positive same-store sales result in five quarters. The latest increase extends that progress into a second consecutive quarter.

Fiddelke has remained cautious despite the improvement, stressing that the company still has significant work ahead. Target is seeking to restore consistent growth, improve customer response and strengthen categories that have struggled.

The company’s latest performance suggests that those efforts are beginning to show results, although the retailer is still focused on making the improvement durable.

Despite the stronger results and higher guidance, Target shares fell about 1% in premarket trading on Wednesday.

Target’s stock has gained more than 55% so far this year, reflecting growing investor confidence in its turnaround efforts. The company now faces the challenge of building on its recent sales gains while reducing its reliance on one-time benefits such as the tariff refunds.

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